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EXHIBIT 2 <br />necessary. If the warranty period specified in the contract is for longer than one year a <br />Maintenance Bond equal to 10% of the contract price is required. Bonds shall be duly executed by <br />a responsible corporate surety, authorized to issue such bonds in the State of California and <br />secured through an authorized agent with an office in California. <br />15.11 Claims and Proceedings. Developer shall give City immediate notice of any <br />material casualty to any portion of the Property, whether or not covered by insurance, and of the <br />initiation or threatened initiation of any proceeding for the condemnation or other taking for <br />public or quasi -public use of any portion of the Property (collectively, "Condemnation"), and shall <br />provide City with copies of all documents which pertain to any such casualty or Condemnation. <br />Developer shall take all action reasonably required by City in connection therewith to protect the <br />interests of Developer and/or City, and City shall be entitled (without regard to the adequacy of its <br />security) to participate in any action, claim, adjustment or proceeding and to be represented therein <br />by counsel of its choice. Developer shall not settle, adjust, or compromise any claim, action, <br />adjustment or proceeding without prior written approval, which approval shall not be unreasonably <br />withheld or delayed. <br />15.12 Delivery of Proceeds to City. In the event that, notwithstanding the "lender's loss <br />payable endorsement" requirement set forth above, the proceeds of any casualty insurance policy <br />described herein are paid to Developer, Developer shall, subject to any superior rights of the <br />Senior Lender, deliver such proceeds to the City immediately upon receipt. <br />15.13 Application of Casualty Insurance Proceeds. Subject to any superior rights of a <br />Senior Lender, any proceeds collected (the "Proceeds") under any casualty insurance policy <br />described in this Agreement shall be disbursed to Developer as provided below, but only upon <br />fulfillment of each of the following conditions (the "Restoration Conditions") within ninety (90) <br />days (unless extended by mutual agreement of Developer and City) following the occurrence of <br />the receipt of the Proceeds: <br />(a) Developer shall demonstrate to City's reasonable satisfaction that the <br />Proceeds (together with amounts deposited by Developer pursuant to subparagraph (b)) will be <br />adequate to repair the Improvements and to restore the fair market value of the Property, within a <br />time period reasonably determined by City, to at least the value it had immediately prior to <br />sustaining the damage. Such demonstration shall include delivery to City of. (i) plans and <br />specifications reasonably satisfactory to City; and, (ii) a construction contract in form and content, <br />and with a contractor, reasonably satisfactory to City; <br />(b) Developer shall execute such documents as City reasonably requires to <br />evidence and secure Developer's obligation to use all amounts disbursed for the diligent <br />restoration of the Property; and, <br />(c) No Event of Default shall remain uncured; provided, however, if an Event <br />of Default has occurred, then Developer shall assign to the City an amount of the Proceeds equal <br />to the disbursements received from the City for the Inclusionary Grant and such amount shall be <br />paid to City prior to any disbursement of the Proceeds to Developer. <br />24 <br />5 53 94.0010 1 \42414134.1 <br />